World Bank Said to Be Planning SDR Bond Sale Next Week in China

(Bloomberg) -- The World Bank plans to issue bonds denominated in the International Monetary Fund’s Special Drawing Rights next week, the world’s first such sale in three decades, people familiar with the matter said.

The notes will price on Aug. 31 in China’s interbank market, the people said, who asked not to be identified because they’re not authorized to speak publicly. The first batch of issuance will be a three-year security with a face value of 500 million SDR units ($701.7 million), according to one of the people. Any new SDR-denominated bond issuance would be the first since the 1980s, according to the IMF.

The Chinese government has been promoting greater international usage of the yuan and the IMF in 2015 decided that it would form part of the SDR from Oct. 1 this year. Major Chinese financial institutions expressed hopes to issue SDR bonds, Yi Gang, the deputy governor at China’s central bank, said in a briefing on Aug. 15.

There was no immediate reply to questions e-mailed to the World Bank in Washington, D.C. after business hours there. The issuance will help promote the use of SDR and “increase Chinese investors’ access to foreign currencies in the domestic bond market,” World Bank Group President Jim Yong Kim said in an Aug. 12 statement.

SDR bonds will help avoid foreign exchange and interest risk stemming from assets denominated in a single currency, and will diversify asset allocation for domestic and international investors, People’s Bank of China said in a statement on the same day.

To contact Bloomberg News staff for this story: Heng Xie in Beijing at hxie34@bloomberg.net, Shuqin Ding in Shanghai at sding28@bloomberg.net, Lianting Tu in Hong Kong at ltu4@bloomberg.net, Xize Kang in Beijing at xkang7@bloomberg.net. To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Ken McCallum

With assistance from Xize Kang, Heng Xie, Lianting Tu, Shuqin Ding